Upbeat Fed news helps rally stocks

Stocks reversed an early slide and ended higher today after the Federal Reserve issued a more upbeat assessment of the economy.

Major stock indexes were down before the Fed released its statement following a two-day meeting on interest rates, then advanced as investors digested the central bank’s comments. Treasury prices also reversed direction, falling after the announcement as investors withdrew money from safe haven holdings.

The Fed said it believes "economic activity has continued to strengthen" since its last meeting in December. However, the Fed did not repeat its assertion that the housing market is improving.

According to preliminary calculations, the Dow Jones industrial average rose 41.87, or 0.4 percent, to 10,236.16. It was down 40 ahead of the Fed’s statement.

Scott Marcouiller, senior equity market strategist Wells Fargo Advisors in St. Louis, said the Fed’s statement that it is slowing its purchase of mortgage-backed securities suggests the central bank believes the U.S. housing market is improving.

The Fed said it expects to complete the purchase of $1.25 trillion in agency mortgage-backed securities and about $175 billion in agency debt by the end of the first quarter.

"Once we settle in here, the market will like this," he added. "This (statement) tells me that they’re comfortable with how the economy is progressing, even though they didn’t come right out and say that."

Reassurance from the Fed couldn’t erase all of investors’ worries about the economy. Caterpillar Inc. hurt the Dow industrials after the equipment maker issued a cautious forecast. The stock fell $2.41, or 4.3 percent, to $53.44.

Apple Inc. rose $1.94, or 0.9 percent, to $208.99 after the company announced a tablet-style computer that looks like a large iPhone.

Falling stocks narrowly outpaced those that rose on the New York Stock Exchange, where volume came to 1.3 billion shares compared with 1.1 billion Tuesday.